Evolution of Institutional Credit Flow to Agricultural Sector in India

Agriculture is the largest sector of the Indian economy. The success of the Indian economy is reliant on the growth of the agricultural sector. One of the essential components for the development of the agricultural sector is credit. Credit is crucial for developing a successful and sustainable farming system. Agricultural production in India depends upon millions of small and marginal farmers. Thus, for agriculture to reach its full potential as a lucrative sector, more and more farmers must have access to sufficient, timely, and affordable institutional loans is crucial. In this paper, the need and institutional arrangements for agriculture credit have been discussed. In India, agricultural credit is disbursed through a multi-agency network. Further, this paper describes the evolution of the institutional structure through a number of changes in government policy that made the use of institutional sources for agricultural loans instead of non-institutional sources. This paper observes that there has not been constant growth in agricultural credit over the years. It has undergone extremely dramatic changes. This helps to understand the impact of the policy measures on agricultural credit with respect to agricultural Gross Domestic Product (GDP). The changing share of different formal institutions, namely Scheduled Commercial Banks (SCBs), Co-operative Institutions, Regional Rural Banks (RRBs), and Micro-Finance Institutions (MFIs) in the overall institutional credit to agriculture has been taken into consideration. In last, the study presents the recent measures such as digitization of land records, land leasing structure, digital innovations in agriculture, various government schemes, etc. taken to expand the reach of institutional credit in the agriculture sector.