Regional Rural Banks

The problem is that the whole concept of the RRBs seems to be flawed. The administrative structures in these organisations essentially replicate those in the nationalised banks, whereas what is needed are low-cost grass-roots organisations with local knowledge.

The example of Bangladeshs Grameen Bank, which has a recovery rate of over 90 per cent, could well be emulated. Sadly, the political will necessary for the drastic restructuring is absent. In the circumstances, all that the higher interest rates will achieve are higher non-performing asset levels, and the denial of credit to the poorer sections.