Final answer:
Banks and cooperative societies increase lending in rural areas to diversify risk, facilitate the money multiplier effect, and support rural development and economic activities.
Step-by-step explanation:
There are several reasons for banks and cooperative societies to increase their lending facilities in rural areas. Firstly, lending to rural areas helps banks diversify their loan portfolio, which protects against risks associated with having all loans concentrated in one sector or geography. Secondly, when banks lend and those loans are redeposited, it creates additional money in the economy through a process called the money multiplier effect. Finally, by extending credit facilities, banks can support rural development, which includes enabling farmers to invest in their operations and potential growth, thereby improving food security and stimulating economic activities in these areas.