56 PROVISION OF BORROWING FACILITIES. 



think it well to offer a few brief remarks on the direction which, in 

 our opinion, a practical scheme of Agricultural Banks should follow. 



290. The underlying idea in all Mutual Credit Associations, 

 such as we recommend, is that a number of persons, by combining 

 together, create a new and valuable security, which none of them 

 previously possessed as individuals. Co-operation substitutes for 

 isolated and helpless agricultural units a strong association competent 

 to offer guarantees and capable of inspiring confidence. The 

 advantages of lending to groups instead of to individuals need no 

 demonstration. It is simpler for a creditor to deal with a group 

 of fifty or a hundred associated cultivators than with the same number 

 singly ; it is simpler for him to obtain repayment from the group 

 than from each of the members composing it ; it is simpler for the 

 group to make its own arrangements with each number than for 

 the lender to try to do so. By thp same process of reasoning, it is 

 simpler for a Central Agricultural Bank to deal with groups of 

 associated cultivators in each village than to make any attempt to 

 deal with each cultivator singly. 



291. To obtain the full advantages that co-operation offers, 

 any group of cultivators, voluntarily associating together to obtain 

 credit on their joint responsibility must agree to abide by certain 

 recognised rules. Notwithstanding the difference between Eastern 

 and Western conditions, the rules of the Raiffeisen credit associations 

 are probably the best that, subject to necessary modifications, any 

 similar association in India could adopt. On this point some further 

 remarks are required ; but before offering them, we desire to remove 

 some misconceptions, which our enquiries have shown to prevail, 

 both as to the scope of village banks and as to the fundamental 

 principles which should regulate their working. 



292. It should be understood from the outset, and made perfectly 

 clear to all concerned, that the establishment of a village bank does 

 not imply the creation of an institution from which the villagers may 

 draw money at their discretion. A village bank, based generally 

 upon the Raiffeisen system, admits no one to membership who does 

 not fulfill certain conditions which are essential for the safe conduct 

 of the bank's operations ; it works only for the benefit of its own 

 members, and it grants no loan except for purposes connected with' 

 the promotion of agriculture. It is most important that these objects 

 and limitations should be clearly understood, so that there may be no 



