Agricultural Credit and Indebtedness
Agricultural Credit and Indebtedness
Ground Realities and Policy Perspectives1
This chapter analyses the trends in the growth of institutional credit to agriculture in India. It shows that in the years following bank nationalization, the institutional credit to agriculture grew at a rate that was significantly faster than the growth of agricultural gross domestic product. Despite this phenomenal growth, the increasing credit needs of agriculture caused by commercialization were not fully met, particularly in the 1990s. As a result, small and marginal farmers became increasingly dependent on expensive informal sources. Credit flow to agriculture declined during the 1990s due to reforms in the financial sector. Although efforts to improve the flow of institutional credit to agriculture were revived in the late 1990s, better credit delivery and effective monitoring must be prioritized. Finally, the chapter examines the role of the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (NABARD) in realizing this goal.
Keywords: India, agriculture, agricultural credit, institutional credit, indebtedness, farmers, reforms, financial sector, Reserve Bank of India, RBI, National Bank for Agriculture and Rural Development, NABARD
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