Analyse the recent source of rural credit which has emerged to fill the gap in the formal credit system.

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After 1969, when Indian banks were nationalised, a multi-agency approach was adopted to deliver rural credit. An apex body called the National Bank for Agriculture and Rural Development (NABARD) was set up in 1982 to coordinate the activities of all institutions involved in the rural financing system. Today, multi-agency institutions like commercial banks, regional rural banks, land development banks and co-operatives are expected to deliver rural credit at reasonable rates of interest.

The most noticeable landmark on this front has been the emergence of Self-Help Groups (SHGs), whose main purpose is to fill the gap in the formal credit system, which has proved inadequate and requires some kind of collateral for all credit activities. SHGs promote thrift in small proportions through a minimum contribution from each member. The money thus pooled is given as credit to the needy members at a reasonable rate of interest, to be repaid in small instalments.

Such credit provisions through SHGs are generally known as micro-credit programmes. SHGs have also brought about the empowerment of women. By March 2003, about 7 lakh SHGs had been credit-linked — a laudable achievement on the rural credit front.