Differential Rate of Interest Scheme in India-Modifications and Progress

One of the objectives of developing countries like India is to endorse the welfare of the neglected/weaker sections. Banks play an imperative role in helping these sectors. For this, initially, one of the most historic initiatives was the substitution of private ownership by public ownership through the nationalization of 14 major banks in 1969 and latest 6 major banks in 1980. As the task of the nationalized banks would be to refurbish vitality to the rural economy, build up the future prosperity of the common men and put in vital strength to both agricultural and rural industry. There had been a structural change in the advances of commercial banks with emphasis shifted from security based lending activities to need based ones. Viability of small, village and cottage industries and also allied agricultural activities, depends on the assured supply of inputs and marketing of output, both at a reasonable and a stable prices. Among other schemes of weaker section, Differential Rate of Interest Scheme is one of them which banks have adapted as a part of their social obligation is an attempt at poverty alleviation. Under this scheme a nominal rate of interest is fixed which is charged from the weaker sections of the society i.e. 4 percent by public sector banks just to provide a substantial relief to the large number of self-employed person of small mean. This paper has been designed especially to highlighted certain modifications made from time to time in respect of eligibility criteria and some conditions of Differential Rate of Interest Scheme in order to make the this scheme more impressive. Further, this explores the progress of the Differential Rate of Interest Scheme since its inception. As the responsibility for the implementation of the Differential Rate of Interest Scheme was by and large entrusted to the public sector banks. And lastly, it ends up with conclusion along with various suggestions for the success of this scheme.