Institutional designs for credit delivery in India can be broadly categorized into three designs – National Banks (including branch-based and agent-based models), Regional Banks and Non-Banking Financial Companies (NBFCs). Despite the existence of these models and considerable innovation in institutional designs, credit penetration in India remains poor. For example, India’s credit to GDP ratio is 76.6%. Similar figures for China, Brazil and South Africa stand at 152.7%, 110.5% and 187.2% respectively. There exists a lot of inter-state and inter-district variation in this metric. For example, while Maharashtra has a credit to GDP ratio of 116%, the same number for Bihar is 16%. From this it is clear that there is an urgent need to improve credit penetration, especially given the large demand for credit in the country and its implications for economic growth.
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