Outreach and Inclusiveness of Formal Agricultural Credit System: Some Reflections

This paper has analyzed the trends and concerns in the formal credit delivery system in India. There has been a signifcant improvement in the flow of institutional credit to agriculture over the years, the effect being more pronounced after the late-1990s. There has been both credit widening and deepening. Interestingly, credit widening has been experienced more for direct finance while credit deepening has been more prominent for indirect finance. Further, a tilt has also been noted towards indirect agricultural finance with its accompanying urbanization, which perhaps is an indication of increasing importance of credit in agricultural value chains beyond primary production. The paper has also examined inclusiveness of the agricultural credit delivery system, and has found that there exists a bias against smallholders, and the gap between large and small landholders in terms of the amount outstanding per account has widened.