Deteminants of Borrowing Behaviour of Farmers
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Date
2012
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Abstract
Agriculture contributed 19 percent o f gross domestic product in India. Agricultural
credit is the major input in agriculttire (Economic Survey, 2009). There is a strong
relationship between agricultural credit and agricultural production. Many o f the
studies had established this relationship (Feder et al, 1990, Foldz,2004). The
Reserve Bank o f India fixed a target lending o f 18 percent net bank credit to the
agricultural sector (Report on trend and progress o f banking, 2009). The Approach
Paper to the Eleventh Five Year Plan has set a target o f 4 per cent fo r the
agriculture sector within the overall GDP growth target o f 9 per cent. In this
context, the need for affordable, sufficient and timely supply o f institutional credit to
agriculture has assumed critical importance. In India a multi-agency approach
comprising co-operative banks, scheduled commercial banks and RRBs has been
followed for purveying credit to agricultural sector. The policy o f agricultural credit
is guided mainly by the considerations o f ensuring adequate and timely availability
o f credit at reasonable rates through the expansion o f institutional framework, its
outreach and scale as also by way o f directed lending.
The demand for agricultural credit arises due to ij lack o f simultaneity between the
realisation o f income and act o f expenditure; ii) lumpiness o f investment in fixed
capital formation; and Hi) stochastic surges in capital needs and saving that accompany technological innovations. Credit, as one o f the critical non-land inputs,
has two-dimensions from the viewpoint o f its contribution to the augmentation o f
agricultural growth viz., availability o f credit (the quantum) and the distribution o f
credit. In backdrop, an attempt was made to identify the determinants o f borrowing
behaviour o f farmers.
To conclude, the per borrower crop loan was higher fo r the medium farmers and
lower fo r the marginal farmers. It was found that there was positive relationship
between the amount o f loan and farm size except for the semi-medium and large
farmers. The amount o f Per borrower investment loan was found to be highest fo r
large farmers. The estimated borrowing function explained 67 percent o f the
variations in the amount borrowed in terms o f the socio-economic characteristics o f
the farmers. O f the variables taken into account, only the land size emerged as
significant variable in explaining the variations in the borrowing behavior in the
study area.