Bank Credit to Small Borrowers: An Analysis based on Supply and Demand Side Indicators

Type Journal Article - Reserve Bank of India Occasional Papers
Title Bank Credit to Small Borrowers: An Analysis based on Supply and Demand Side Indicators
Volume 35 & 36
Issue 1 & 2
Publication (Day/Month/Year) 2015
This paper analyses the coverage of small borrowers by Indian banks using data on credit
portfolios of banks (supply side) and debt portfolios of borrowing households (demand side).
The paper makes use of the data on bank credit under small borrowal accounts (SBAs) extracted
from the annual Basic Statistical Returns of Scheduled Commercial Banks in India as well as
the periodic SBA surveys conducted by the Reserve Bank of India (RBI). It also makes use
of data on household debt portfolios from the All-India Debt and Investment Survey, Rural
Labour Enquiry and unit-level data from the 66th Employment-Unemployment Survey of the
National Sample Survey Organisation. Using these data, it analyses the changes in the flow of
bank credit to some of the socially and economically vulnerable sections of the population that
broadly represent small borrowers in India. The paper brings out that there have been certain
favourable changes with regard to the coverage of small borrowers by the banking system
since 2005. The major gainers during this period have been small women borrowers from rural
areas, agricultural/rural labourers and small/marginal cultivators. However, there are signs
of decline in the shares of small women borrowers from urban areas and of backward social
groups in total bank credit during this period. The paper highlights the need to continue with
the policy of financial inclusion for strengthening banking presence in rural areas but also to
give attention to urban poor in light of the increase in urbanisation.

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