Comparative Cost of Agricultural Credit in Punjab

The cost of credit is an important factor having widespread ramifications for the agriculture sector. The present study has looked into different aspects of credit acquisition from various sources in terms of formalities, documentation, time, overhead expenditure, etc. It has also brought out the reasons behind preference for one agency over the other in the light of factors like collaterals, security, disbursement mode, etc. It is based on primary data collected from 320 households across three agro-climatic zones of Punjab. The cost of borrowing has been found to be higher from non-institutional sources of finance than from institutional sources of finance. But still there is a strong presence of informal credit in the agricultural credit scenario in the state. The study has found that factors like ease, timeliness, convenience, informal atmosphere attached to informal sources of finance are the reasons behind their non-elimination from the agricultural credit scenario. Other factors like psychological perceptions, and personal incapabilites such as illiteracy, easy attitude, low level of awareness, etc. on the part of borrower-farmers also add to the strong presence of non-institutional sources of agricultural credit.