........Those small borrowers who were thrown out of the formal financial sector, sought refuge in the arms of the moneylenders and have stayed there. All this went on, till say 2008, when financial inclusion became fashionable. There are limits to the PSBs’ ability to reach out. First, physical access and second resource constraint. The credit deposit ratio was 78 per cent in August 2013 and the incremental credit- deposit ratio 70 per cent. Thus the PSBs are already over- stretched. But the solution is not new, small private sector banks, which may take time to grow roots in the rural economy. The cooperative sector holds out great potential in this context. Look at the reach of cooperatives. Cooperatives account for a relatively small share in the bank– dominated Indian financial system. However, given their geographic and demographic outreach, they hold a key position in the financial system. Geographically, cooperatives have been instrumental in extending formal financial services to villages and small towns in India...........
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