In contrast to tall claims by the Centre, key schemes introduced since 2014 after the Narendra Modi-led government came to power, have not improved the rural population's access to easy credit in the country. Schemes like the Pradhan Mantri Mudra Yojana (PMMY) and the Pradhan Mantri Jan Dhan Yojana (PMJDY), focused on financial inclusion and credit availability, are yet to bring about much changes in improving indebtedness among rural population in India.
On the other hand, credit to small borrowers who constitute a large proportion of rural credit has, in fact, fallen between 2014 and 2017, indicating that the bulk of the rural population is still hugely dependent on ruthless moneylenders for credit.
These are among the findings of a study titled, “Ensnared in Poverty: A Study on Rural Indebtedness in India” by Thought Arbitrage, done jointly with trade body ASSOCHAM. The study analysed the government's more innovative schemes designed to bank the unbanked, such as Mudra Yojana, Jan Dhan Yojana and Bima Pension Yojana. These were aimed at loosening credit constraints in the informal sector.
Although the share of rural credit from the scheduled banks remained roughly around 9 per cent between March 2014 and June 2017, the share of small borrowers declined over time—from 36.5 per cent in March 2014 to 33 per cent by June 2017. This, according to the study, shows “that the schemes introduced since 2014 did not prove particularly beneficial in providing easy credit access in rural areas and have not made much of a mark in improving rural indebtedness—in fact, it appears to have worsened marginally”.
The share of personal loans—described as loans for unproductive purposes—in total rural credit through scheduled banks witnessed an increasing trend since 2014, touching almost 20 per cent in 2017. The government's credit schemes, however, appeared to have failed to alter this trend, the study points out.
This implies that non-institutional lenders, including the wily village moneylender, continue to be an important source of credit in the countryside.
Worse, the study says a major share of the rural credit was lent to the comparatively well off, leaving the poorer to the mercy of moneylenders.
