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Role of Commercial Banks in Rural Development

Role of Commercial Banks in Rural Development. Although our economy is mainly agrarian, banks play an important part in the development of our rural areas. The rural branches of banks provide various services to farmers, rural farmers, businessmen, and disadvantaged groups and help them to develop themselves thereby.


Role of Commercial Banks in Rural Development


Role of Commercial Banks in Rural Development


Banks working in rural areas. Our banking sector consists of three kinds of banks-State Owned Commercial Banks (SOBs), Private Commercial Banks and Foreign Private Commercial Banks. Among them, Nationalized Commercial Banks and some other private banks and more particularly some specialized banks are operative in rural areas. The foreign private banks are not interested to open their branches in rural areas.


Role of the bank in rural development – The role of the bank in rural development is manifold. Banks are functional in the processes of savings, capital formation, investment, production in the rural economy.

Role of Commercial Banks in Rural Development.. Such as –

  • Banks motivate the people for savings through various programs and collect the dispersed savings of the people. Further, the bank invests it in the rural economy.
  • Banks provide the rural small businessmen with loans from deposited money which plays a crucial role in rural development. Especially, the micro-credit programs of different banks made the rural landless people bankable and provided them with the required capital for business and other economic activities.
  • Banks play a crucial role in rural capital formation. Banks collect the dispersed savings of rural people through different deposit schemes. Then distribute loans to them for starting a productive as well as any other self-sufficient economic activity.
  • Commercial and specialized banks, specially State-Owned Commercial Banks (NCBs) distribute agricultural loans to rural people which make them able to invest in their firms or lands. As most of our farmers are poor they can not invest enough to increase the production. 80, bank loans help them to increase their production through proper irrigation, fertilization and so on.
  • Banks play a crucial role in sustaining and developing our small and cottage industries. Because most of our small and cottage industries are being closed due to lack of enough capital.
  • Banks can provide our unemployed youths with training and loan to start a business or to invest in a farm. Such training and income-generating projects can make our youths self-reliant, lessen the intricate problem of unemployment and improve the standard of living in our rural areas.
  • Banks play a crucial role in mentioning the disadvantaged groups in the community under some special programs. Even, through making the disadvantaged people economically self-sufficient, banks play important role to empower them and lessen social inequality thereby.


In spite of such prospects as discussed above, banks in our country are not effective enough in rural development.

A number of causes are responsible for such failure among whom some notable causes are as under

  1. There are some problems in bank management that disrupt the very process of loan distribution as well as the collection. Hence, loans, especially government loans are not being distributed through proper channel and manner.


  1. Our people are not oriented to savings and investment. They lack motivation for savings and investment.


  1. The people cannot utilize the distributed money/ loan properly. Even banks also are not undertaking training programs to make them able to utilize the loans properly.


  1. People have to face serious complexities to get loans. Besides, people who get loans do not return on time.


In spite of some limitations, the role of the bank in rural development in our country is praiseworthy. speedway’ the microcredit program, primarily introduced by Grameen Bank, has become widespread and played โ€˜ crucial role in the well being of rural poor. However, our government, private bank authorities should mandrake more comprehensive programs for rural development.ย Role of Commercial Banks in Rural Development.


Role of Commercial Banks in Rural Development.


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About Mohammed Ahaduzzaman

Mr. Zaman is a Founder and Freelance Writer @ BBALectures Blog! Blogging is his passion. He loves writing on Entrepreneurship, Finances, Accounting, HR and Business Issues. By profession, He serving as Accounting Professional at Zaman Accounting.

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