Determinants of Demand for Credit in Agriculture
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Date
2014
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Abstract
The present three-tier system o f co-operative institutional structure for short and r r -a um tem loans and a separate
co-operative institutional set up for long term loan came to be permanently estabUsh.ec ;n the late thirties. But the
co-operatives could not meet even one-tenth o f the credit needed by the farmers in 1951-52 cs estimated by All India
Rural Credit Survey Committee (195152). This led to the intensification o f the co-operatives' credit activities during the hrst three five year plans.
Despite intensive efforts, the institutional sources met only 18.70 per cent (co-operatives 15.5 per cent) o f credit needs o f farmers in 1961 62.
In 1969, the government made a significant shift away from a single agetrcy approach to the multi-agency approach invcTrng commercial
banks on a large scale iri the provision of institutional agricultural credit. Commercial banks, which were foilo'wing urban 'entered lending )
policy, were to involve in the process o f rural developmerU through their lending to the priority sector. A mandate to this effect was given by the
nationalization of 14 major commercial banks in July 1969 and another six banks in April 1980. Subsequently, the regional rural banks were
established in 1975 to focus special attention on the marginal and small farmers, agricultural labourers and rural artisans.
Further the National Bank for Agriculture and Rural Development (NA8ARD) v/as set up in 1982 to refinance all institutional agencies such
as commercial banks. Regional Rural Banks and co-operative banks. To strengthen the existing rural credit delivery system, the Service Area
Approach (SAA) to rural lending was accepted as the National Policy in 1989. The kisan credit card system was introduced in 1997tomcrea'sethe
flow of agricultural credit to the farmers. Due to the above policy measures, the institutional credit had increased considerably. The formal sector
consisting ofco-operdth/es, commercial banks and the Regional Rural Banks is the main conduit fdr providing agricultural credit. Td conclude,
higher amount of croploandemand was noticed for small farmers. The marginal farmers had demanded for higher amount o f investment Idan.
Hence the size oflatid holding had negative relationship with the demand for credit. The higher the size of land had reduced the demand credit.