Critically evaluate the role of the rural banking system in the process of rural development in India.

Rural banking has raised the level of rural farm and non-farm output, income and employment, especially after the Green Revolution.

The following are the advantages of an increase in rural banking facilities

(i) Raising farm and non-farm output by providing services and credit facilities to farmers.

(ii) Generating credit for self-employment schemes in rural areas.

(iii) Achieving food security which is clear from the abundant buffer stocks of grains.

However, the expansion and promotion of rural banking sector have taken a back seat after reforms, and it suffers from the following limitations

(i) Small and marginal farmers receive only a very small portion of the institutional credit.

(ii) Rural banking is suffering from the problems of a large amount of over dues and default rate.

(iii) The source of institutional finance is inadequate to meet the requirements of

(iv) There exist regional inequalities in the distribution of institutional credit.

To improve the situation, the banks should build relationship with farmers. Also, the farmers should be made to understand the importance of thrift and of efficient utilisation of the loaned amount.

The rural banking system has expanded since independence due to the efforts of the government to expand bank branches and correspondents across rural India since credit availability is a major impediment to development of rural society. critical analysis of its impact:

successes- 

1. expanding credit coverage. Jan dhan accounts have expanded coverage significantly. 
2. better access to farm inputs such as implements, fertilisers, seeds, etc. 

3. green revolution was heavily dependent on credit access since it requires intensive use of both water and fertilisers. 
4. expanding non farm output through credit provisioning through regional rural banks, cooperative banks, etc. 

failures: 

1. unequal distribution of credit. Credit is concentrated in the green revolution states and maharashtra, and deprived in the northeast. 
2. high rates of default and risk due to agriculture failures resulting from monsoon vagaries. 
3. non institutional credit is still very high (35% of total rural credit) 

4. failing agriculture due to structural issues, lack of irrigation, and falling gdp. Credit alone can't be enough.

in conclusion, credit access is a prerequisite for development but has to supplemented through public investments so that agriculture yields adequate returns on invested credit, else development gains won't accrue.