MONEY MARKET, RURAL FINANCE AND FINANCIAL INCLUSION IN INDIA

Abstract

The rural sector occupies an important place in the Indian economy as 65% of the population resides there. There is a dichotomy in the structure of the Indian money market, with the people depending heavily on the money lenders and other indigenous sources of finance .With increasing diversification of agriculture the demand for agriculture increases. This outstrips the supply. It is imperative that agriculture and credit be made available at the right time.  A number of banks and financial companies have begun specializing in offering credit to the farmers. Rural finance can be considered as a line of credit to them, specifically intended for requirements of agriculture and industry. In view of the fact that poverty exists in rural areas, there is scarcity of capital, commercial banks can help promote economic development by mobilizing savings, financing industry, providing finance to trade, providing loans to agriculture and related activities, helping in buying of consumer durables and promoting employment generating activities.  Over the years there has been a definite spurt in the provision of institutional finance to the priority sector with emphasis on microfinance.  The state of financial inclusion is quite dismal in India. After the demonetization of the Indian Rupee in the midnight of 8th November 2016, Indian banks have been pushing the cause of complete financial inclusion. People are being encouraged to use electronic banking services and digital platform to counter the problem of currency shortage. However, there are a number of hindrances and India has a long way to go for achieving total financial inclusion. Poor infrastructure and telecommunication coupled with banking regulations hinder the expansion of banking network. While Microfinance institutions can help in filling the gap, the need of the hour is educating the people and creating social awareness.