Institutional Finance For Agriculture Development In India

Abstract

The present study highlights the agricultural credit scenario in India with special focus on institutional finance to agriculture sector in India. It also identifies the important issues in agriculture credit market. In India, it is well known that most of the farmers dependent on external finance to enable cultivation. In the recent years, increasing diversification of agriculture has seen an increase in credit needs. Easy availability of adequate agriculture finance at the right time has an important role in the development of the agriculture as well as for rural development. The result shows that in India, demand for agriculture credit is much higher than its actual supply. Within the institutional framework, co-operative banks have lost their leading position, while the commercial banks have emerged as an important segment. Though over the years, the institutional credit flow to agriculture has increased significantly, a large number of farmers are still out of reach of these institutional credits. In this situation the farmers are left with no alternatives but to move to the informal market. In this market they get trapped and are even compelled to commit the suicide. Inadequacy, weak institutional network, heavy indebtedness, high transaction cost, low credit-deposit ratios in several States and the continued presence of informal markets are the serious problems related to the agriculture credit. For the development of agriculture, as well as, for whole economy, it is necessary that these problems should be address on priority