Why is it necessary for the banks and the cooperative societies to increase their lending facilities in the rural areas? Explain.

It is necessary for the banks and the cooperative societies to increase their lending facilities in the rural areas because of the following reasons:

1. Addressing the Credit Gap: Rural areas often grapple with a stark absence of formal credit institutions. By expanding lending facilities, banks and cooperatives can bridge this gap and ensure that rural inhabitants have better access to formal, structured credit.

2. Countering Exploitative Lending: In the absence of formal lending institutions, many rural inhabitants resort to borrowing from local moneylenders. These moneylenders often charge exorbitant interest rates, leading borrowers into a vicious cycle of debt. Increased lending facilities can offer a more equitable and affordable alternative to these predatory lenders.

3. Promoting Sustainable Growth: Affordable credit can catalyze various rural development projects, from infrastructure enhancement to agricultural modernization. By providing loans at reasonable rates, banks and cooperatives can foster sustainable economic growth in these regions.

4. Encouraging Entrepreneurship and Innovation: With better access to funds, rural individuals can pursue entrepreneurial ventures, be it in agriculture, small-scale industries, or other sectors. This can lead to job creation, skill development, and a boost in local economies.

5. Social Upliftment: Ensuring that rural communities have access to fair credit systems can play a crucial role in elevating their social and economic status. It can empower them to break free from traditional debt traps, invest in education, and improve their overall quality of life.

In essence, expanding lending facilities in rural areas isn’t just about providing loans; it’s about fostering equitable growth, empowering communities, and driving forward the broader goals of economic and social development.