What Determines the Availability of Formal Agricultural Bank Credit in Rural India? A Macro Perspective

Authors

  • Bhagirath Prakash Baria Assistant Professor, Department of Banking and Insurance, Faculty of Commerce, The Maharaja Sayajirao University of Baroda, Vadodara, Gujarat
  • Sofia Devi Shamurailatpam Assistant Professor, Department of Banking and Insurance, Faculty of Commerce, The Maharaja Sayajirao University of Baroda, Vadodara, Gujarat

DOI:

https://doi.org/10.25175/jrd/2022/v41/i4/154039

Keywords:

Agricultural credit, agricultural economics, agricultural productivity, bank credit, financial inclusion, food price, rural development

Abstract

The central organising theme of this paper is the study of the factors that determine the availability of formal agricultural credit to rural households in India for the period 1991-92 to 2018-19. Grounded in economic theory, this work proposes a model of the determinants of the availability and access to formal agricultural bank credit in India by accounting for both the underlying demand and supply functions of the aggregate formal credit market of Indian agriculture. The study uses an Ordinary Least Squares framework to analyse the issue under consideration while carefully framing the estimated model in terms of the underlying theory, its econometric properties and the policy robustness of estimated results. The study finds that active policy interventions on the demand side of the agricultural credit market in India are the urgent need of the hour if the objectives of financial inclusion and inclusive development are to be achieved in spirit and action. This is the case because the availability of formal bank credit to agricultural borrowers is found to be largely driven by factors that directly affect the demand for credit rather than its supply. With an already well-regulated allocation and distribution environment for agricultural credit in India, it is now the demand-side forces that require active policy disruptions and innovations.

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Published

2022-12-30

How to Cite

Baria, B. P., & Shamurailatpam, S. D. (2022). What Determines the Availability of Formal Agricultural Bank Credit in Rural India? A Macro Perspective. Journal of Rural Development, 41(4), 410–427. https://doi.org/10.25175/jrd/2022/v41/i4/154039

Issue

Volume 41, Issue 4, October - December 2022

Section

Articles
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