Future Of Rural Banking

Future of Rural Banking*
I am grateful to the Ram Reddy Memorial Trust for giving me an opportunity to deliver this
endowment lecture. I knew Ram Reddy Sab since 1960 and, like some of you here, we
developed abiding affection towards each other. To me, he was indeed, a friend, philosopher and
guide in every sense of the word. He won people’s heart, made academic contributions and built
lasting institutions, and he achieved all this without ever displeasing or hurting any one. A
scholar and a gentleman to the core, I cannot think of anyone in India who has contributed as
much to advancement of higher education as he did. He simply, with one stroke or may be two,
one in Hyderabad and one at all-India level, made higher education open, virtually to all. I feel
greatly honoured at being called upon to be with you, since some of us have grown up in the last
three to four decades, as part of one extended family of Ram Reddy garu. Since we are aware of
his abiding interest in rural areas, especially the dynamics of rural development, I will speak on
Future of Rural Banking. I hope to reflect in the lecture, the pragmatism and analytical rigour
that Ram Reddy Sab would always insist upon.
Banking in Ancient India
Let me start by sharing with you some features of banking in India in ancient times since you
may still find traces of such ancient banking practices in isolated rural areas in our country.
Like in many other aspects, we have a long tradition of banking. Evidence regarding the
existence of money-lending operations in India is found in the literature of the Vedic times, i.e.,
2000 to 1400 B.C. The literature of the Buddhist period, e.g., the Jatakas, and recent
archaeological discoveries supply evidence of the existence of sresthis, or bankers. From the
laws of Manu, it appears that money-lending and allied problems had assumed considerable
importance in ancient India.
What were the interest rates? The role of interest rates.