From financial products and services to the people living

From discussion till now, we are completely familiarized withthe role up-tapped rural India will play in Indian economic growth in future. Ruralbanking sector has been and will be seen as the key institution for achieving financialinclusion by providing financial products and services to the people living inthe farthest reach of the country. The rural banks (mainly commercial banks,cooperative banks and regional rural banks) have been into the existence inIndian financial scene for around 38 years now, but rural areas still havecontinued to suffer from insufficient access to financial services. The mainreason of incapability in achieving one hundred per cent rural financialinclusion is the challenges and difficulties which are faced by these banks intheir operations and expansion.

Various challenges faced by Indian rural banking system are enumeratedas under:1.     Organisationaland Managerial Problem2.     BranchExpansion3.     Advancingof loans4.

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     Recoveryof Loans5.     ProceduralProblemsEach of these issues are broadly explained below.Organisational and Managerial Problem70 per cent of rural population in India has been spread overthe 5.6 Lakhs villages all across India and more than half of these villageshave a population count of less than 500 individuals. These individuals are thepotential customer for every banks but the major problem faced by the banks isto keep constant communication with these individuals and their families.

Constructing a branch in every such remote location is infeasible since it willbe impossible for banks to operate profitably with such minimal population. Hence,reaching and catering this section of population possess an issue. Secondly, in location where branches are present,availability of suitable and adequately trained staff is a biggest issue.

Finding and training staff in accordance with the constraints like locallanguage, culture and traditions of the local people to understand theirproblem and giving them solutions accordingly is the difficult task adding tothe periodical transfer of these staff members. Thirdly, the staff orientation of these banks towards citiespossess another issue since they fail to adapt themselves sufficiently tobecome integral part of the socio-economic environment of areas in which theyfunction. This result into performance lags by these highly capable staffmembers, hence performance of these banks suffer. The staff members of officerlevel and above who have responsibility to lead these banks look for urbanoptions because of higher salaries allowances, perks and facilities incities.  This tendency has posed problemsin leadership of the rural banks at operational level.

Fourthly, the differences in the pay scale of staff of RRB’sand commercial banks possess a potential threat in coming years to retain staffwith such salary differences for the same work both banks undertake.Fifth, overlapping financial institution another financialissues which are faced these banks. At present number of financial institutionswhich are operating in same rural areas. This resulted in overlapping of operationalareas like double or multiple financing, unhealthy competition among competing ruralfinancial institutions and less area coverage as various rural institutions areconcentrated at limited rural destination.