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Indian banks were nationalised in 1969 for investing the finance in rural and other neglected areas to (i) increase agricultural production, (ii) encourage non-farm activities, (iii) correct regional imbalance and (iv) reduce inequality and poverty. Although 40 per cent of lending has been earmarked for above objectives, general feeling in the society is that priority sector lending has not been effective. An attempt has been made here to analyse the agricultural growth in India in last three decades; effect of different factors on agricultural performance; and role of credit in influencing input pattern. Agricultural credit data then has been analysed to understand the behaviour of rural credit institutions. Finally long-run and short-run policies have been discussed which can make these institutions effective in performing their role for which they were nationalised. These policies include (i) change of values and attitude of professionals towards priority sector lending, and inculcating a new sense of development, (ii) new lending methodology with people participation, (iii) alternative performance indicators, (iv) appropriate credit policy to take care of both banking and non-banking dimensions specially in case of the poor, and finally (v) a different organisational setup with an alternative reward system for implementing new credit policy efficientlyISBN:8170225221
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Pages : 140
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