[quickdraw46]

Err, thats a very old school thought. Its more that these people don't believe in banks or the banking system. In-fact most of rural India still has people taking loans from 'zamindars' who end up charging insane interest rates and forcefully taking away property/farms from the poor farmers.

[webbrahmin]

Not quite true. I connected to my village and and spend around two months there every year.

1. The Zamaindari (Zamin = Land ZaminDar = Big Land Owner ZaminDari = A system of exploitation set-up by British now dismantled.) system is over. Period. There are some big land wonders left but I am not going into it. 2. Poor borrow from money lenders who may or may not be big land owners. But in almost all the cases these money lenders are local muscle men, like everywhere else in the world. This is how parallel money lending works all over the world. The local moneylender lends money. Charges exorbitant rates. In case of non payment the life is made hell for the debtor. In many cases the debtor borrows money and spends it on gambling and alcohol and ends up loosing all his wealth to the money lender. BTW the money lender also accepts deposits. But they don't usually pay interest on the deposits. Many times these deposits work in an interesting way - what is called a "committee" in some parts of the country. Lets say there are 1000 contributors in the "committee" each depositing Rs 500 every month. Let's say duration of the committee is 2 years. Each month a lottery is conducted with one winner. The winner gets Rs 24 x 500 = 12,000 and stops contributing. The remaining members keep contributing. At the end of 24 months each remaining member gets 12,000 each. If a member misses a payment his/her contribution till date is forfeited. These moneylenders also accept deposits for safekeeping. Usually no interest is paid. Government's scheme plans to break this. 3. Government owned banks lend billions of Rupees every year to poor farmers and other economically/socially weaker sections. These loans were usually waived off by the Central (Federal) government. Populism over economics. 4. Opening of bank accounts is first step towards financial inclusion. 5. The number 15 million should be taken with a pinch of salt. Some banks like Bank Of Baroda were opening zero balance accounts and many who already had accounts opened another one with such banks. Branches were given targets and many opened accounts for family and friends who already had bank accounts.

[quickdraw46]

Ah yes my bad, I mislabeled the money lender people as zamindars. Thats just the old school name. I do agree with most of what you have to say, and guess its a good thing with all the bank accounts opening. It should somewhat curb the absolute chaos the rural India economy is in.

The thing you talk about are also knows as BC (or the link) and its quite common even in metros. There is also a variation of it run by jewellers (and gold traders) where one pays a fixed amount every month which is invested in gold.

If you don't mind me asking, which village? My roots are from a small town in UP which I have only visited once. But I am deeply intrigued by rural India and it always blows my mind when I realize most of the country's population is in rural India.

[webbrahmin]

My village is in Muzaffarpur district of Bihar. We grow leeche nuts and mangoes :)

[jagira]

kind of like payday loans?

[cubancigar11]

I think knowing that at the end of the month you are going to have some money (in bank) is a revolutionary change. It converts your own perception of being a day-labor to a salaried person without actually doing much. Whether it brings positive change or negative is still to be seen but a change in perception of self is definitely a drastic step towards removing poverty.