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Informal local governance institutions (ILGIs) are complex organisations, which continue to be prevalent at village level in rural India. Although generally perceived by educated Indians to be “oppressive”, ILGIs also have progressive features and often perform a range of useful, collective functions at the village level. Rather than shrinking in the face of modernity ILGIs have found ways to interact, often in a positive manner, with the newer formal, elected local government institutions–Grama Panchayats. On the basis of field research in Karnataka state, this paper tries to present a more holistic picture of ILGIs, including their role in village governance and service delivery; the ways in which they interact with Grama Panchayats, and the implications of their existence and role for local democracy. Finally, I present a tentative theoretical framework that might help explain why in Karnataka–and in India generally–ILGIs seem to be less repressive, more functional, and more likely to survive than in some other countries of the South.