The development of financial sector lays a positive impact on the economic growth of a country. It serves as a foundation for mobilisation and allocation of finance which is life and blood for the growth and development of an economy. Therefore, the existence of an efficient financial system facilitates economic activity as well as growth. The large part of the population in rural areas is dependent on agricultural activities for earning income. India, being a rural and agrarian economy, needed some special institutions that could focus on the financial needs of rural poor, particularly those who are engaged in the agricultural activities. SBLP has become an effective tool for achieving the goals of financial inclusion focusing primarily on the poor women. This paper aims at exploring the present status of microfinance in India with special reference to self-help group bank linkage programme. It is a qualitative review of the present scenario based on extensive available literature which is supported by secondary data taken from latest reports of NABARD.
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Attaining desired level of development is a primary goal of every developing nation. The development of a nation is not limited only to its structural development, but it is the development of everyone residing in the country, both in terms of economic as well as social aspects. Basic facilities like food, water, shelter, education, and employment are some of the parameters. But these facilities are available to them only when they are financially sound or they are able to earn (United Nation, 1995). India, being a developing nation, includes a great portion of population who do not have enough money to avail even these basic facilities. Certain issues like poverty, inequality, unemployment, and regional disparities are faced by developing countries which create hurdles in attaining the developmental goals. Thereby it becomes important that these issues should be addressed at various levels.
The development of financial sector lays a positive impact on the economic growth of a country (Levine, 1997). It serves as a foundation for mobilisation and allocation of finance that is life and blood for the growth and development of an economy. A formal financial system helps in channelizing savings into investments that lead to capital formation and finally contributes to the growth and economic development of the country. Formal financial system is indispensable for an economy as it helps in creating a bridge between demand and supply of financial resources in the market. A well-structured financial system can be divided into different institutions and markets (Pathak, 2003). The informal financial sector is an unorganised, non-institutional and a non-regulated system. Most of the developing nations are characterised by the co-existence of formal and informal financial sectors.
Indian financial system can be divided into two parts i.e. formal and informal financial sector. The formal financial sector comes under the purview of Ministry of Finance, Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI) and other regulatory bodies. It includes various categories of banks and financial institutions. This sector follows the banking regulations and other regulations as prescribed by some apex bodies to function smoothly. On the other hand, the informal institutions are those which are not regulated by government or any other agencies. It constitutes of informal moneylenders, group of persons operating as associations, local brokers etc. They lend finance on mutual trust basis with or without collaterals (Ledgerwood, 1998).
The financial system of a country is based on the four fundamental pillars namely existence of financial institutions, operation of financial markets, existence of financial instruments and providing financial services. The developmental financial institutions are specially engaged in contributing to the upliftment of rural areas by focussing on agricultural sector, small-scale industries and other priority sector areas. The Indian banking sector has an important and crucial role to play in meeting the financial needs of various segments of society (Pathak, 2003). Nationalization of banks in 1969 was a necessary step for the improvement of the banking sector as well as the economy as a whole (Joshi, 2006). Reserve Bank of India has also concentrated by augmenting different measures on priority sectors in different five-year plans. In the era of nineties after the initiation of banking sector reforms, this sector witnessed an overall growth in many aspects including reaching to the rural population by adopting financial inclusion measures.