Institutional framework for dispensing rural credit after independence has undergone a tremendous qualitative, quantitative and structural changes. This paper examines the existing rural credit system in India in order to assess how far they have been able to meet the growing credit needs of the rural borrowers. The government policy on rural credit has been one of the progressive institutionalisation aimed at providing timely and adequate credit to rural borrowers. Using data from secondary sources, this paper concludes that non-performing assets and overdues is the major area of concern in rural financial institutions in India. The authors strongly recommend that corrective actions should be taken such as focus on monitoring and supervision of the end use of credit by the borrowers, rather than merely disbursing credit. Many recommendations have been made to convert the loss making Rural Financial Institutions into profitable institutions.

KEYWORDS: Rural Credit, Rural Financial Institutions, Non-Performing Assets, Cooperatives.