Micro credit or micro finance is a relatively new approach to banking with the poor in which small amounts of bank credit are extended to low income households mainly through which institutional mechanism in India?

Introduction / Context:
This question focuses on the concept of micro credit or micro finance, which aims to provide small loans and financial services to poor households who are often excluded from formal banking. In India, a distinctive institutional model has evolved for delivering such credit in a sustainable and socially supportive way. Recognising which mechanism is most closely associated with micro finance helps you understand rural development and financial inclusion strategies in the country.

Given Data / Assumptions:

• The term micro credit or micro finance refers to small loans and related services targeted at low income clients.
• The options include Self Help Groups, Anganwadi, Cooperative Credit Societies, and the Reserve Bank of India.
• We assume awareness of the Self Help Group bank linkage programme and other rural development initiatives.
• The question asks through which institutional approach bank credit is extended to the poor under this new model.

Concept / Approach:
In India, the most prominent model for delivering micro finance has been the Self Help Group bank linkage programme. In this model, small groups of poor, usually women, come together to form Self Help Groups, pool their savings, and then access bank credit as a group. The group guarantees loans for its members, reduces transaction costs, and builds credit discipline. Anganwadi centres are part of the Integrated Child Development Services and focus on health and nutrition, not formal credit delivery. Cooperative credit societies are older institutions that serve farmers and local communities but are distinct from the micro finance innovations highlighted in recent decades. The Reserve Bank of India is the central bank and regulator, not the direct provider of micro loans at the grassroots level.

Step-by-Step Solution:
Step 1: Recall that micro finance in India is popularly associated with group based lending to poor women in rural and semi urban areas.Step 2: The Self Help Group model involves groups that save regularly and then receive bank loans linked to the group corpus.Step 3: This model has been widely promoted by NABARD and commercial banks and is considered a key innovation in banking with the poor.Step 4: Anganwadi centres primarily deliver nutrition and pre school education services and are not the main channels for bank credit.Step 5: Cooperative credit societies provide credit, but they are not described as the novel micro credit approach referred to in the question.Step 6: The Reserve Bank of India regulates banks but does not directly implement group based micro lending at the village level.Step 7: Therefore, the correct answer is that micro credit is extended mainly through Self Help Groups.

Verification / Alternative check:
Development reports and exam oriented summaries on financial inclusion often highlight the Self Help Group bank linkage programme as the largest micro finance programme in the world. They explain how SHGs are formed, how they interact with banks, and how they empower women while expanding access to credit. These descriptions match the phrase novel approach to banking with the poor. Anganwadi and cooperative societies are referenced in different contexts, and the RBI is a regulator, confirming that SHGs are the intended answer.

Why Other Options Are Wrong:
Anganwadi: These centres focus on child and maternal nutrition and pre school education and are not designed to function as micro credit institutions.

Co operative Credit Societies: These are important in rural finance but are part of a longstanding cooperative structure, not the newer micro finance model described here.

Reserve Bank of India: The RBI formulates policy and regulates the banking system but does not directly implement group based micro lending schemes for the poor.

Common Pitfalls:
Some learners confuse any rural institution with micro finance and may incorrectly choose cooperative societies or Anganwadi. Others may know the RBI role in authorising micro finance institutions and think it is the direct channel. To avoid such confusion, remember that micro finance delivery at the village level in India is typically organised through Self Help Groups linked to formal banks, which is the hallmark of the Indian model.

Final Answer:
Under the micro credit approach in India, bank credit to the poor is mainly extended through Self Help Groups.