Economics • Banking & FinanceMedium
What structural challenge historically explains why certain backward rural districts in southern Haryana exhibit lower credit-deposit ratios compared to commercial hubs like Gurugram?
A. Limited presence of bankable industrial projects, lower collateral asset values, and higher perceived credit risk in dryland farming areas✓ Correct Answer
B. An absolute legal prohibition enforced by the RBI preventing rural branches from issuing loans
C. Mandatory statutory rules requiring rural banks to maintain a 100 percent cash reserve ratio
D. Complete absence of any savings bank accounts among rural households in the state
💡 Solution & Explanation
Low credit-deposit ratios in agrarian districts stem from structural deficiencies such as lack of industrial collateral, fragmented land holdings, and vulnerability to climatic shocks, which make commercial lenders cautious about extending large credit volumes. Conversely, urban corporate centers attract high credit flows due to robust commercial activities and secure corporate balance sheets. State government initiatives actively encourage banks through special credit camps to bridge this regional disparity.
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