The purpose of this article is to prove that though sophisticated international models cannot be applied, through a sympathetic micro level approach with NGO and SHG linkages, the banks in India could play a very significant role in the provision of micro-credit facilities and financial services to bring about an overall improvement in the living standards of the rural people.

The existing credit institutions and the initiatives taken by the authorities have not helped the rural poor to improve their standard and welfare. With regard to the provision of credit there seems to be a big gap between the requirement of rural people and their convenience. The outreach of banking institutions, undoubtedly, has seen a rapid progress with 48% of their branches catering to a population of 23,000 per branch, 31% of their deposit accounts and 43% of their borrowed accounts in the rural areas (Banking Statistics, RBI, 2003). The statistics show the availability of banking services only to the tune of 18.4% of the rural population (Rural Population, India, Census 2001) through savings/accounts and a still lower percentage of 17.2% of the rural households through loan accounts.

The unfavorable situation of low productivity, deficiencies of other credit agencies and inaccessible banking sector services have led the rural areas into doldrums looking up to the expensive and exploiting money lenders for loans. The purpose of this article is to emphasize that there is need for a more prominent role to be played by the banking institutions through devices that could improve the rural lot. In recent times there have been frequent discussions and deliberations going on with regard to the importance of microfinance facilities and services by the banks in the rural areas.

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