Agricultural credit in Punjab: Trends and future potential

This study examines various aspects of agricultural credit in Punjab using primary and secondary data. Under state-directed lending policies, the institutional agricultural credit has witnessed massive expansion since 2004–05. However, the credit disbursement far outpaced the actual demand for agricultural credit. It caused a significant amount of credit diversion towards house construction, immigration of family members, purchase of vehicles, expenditure on social ceremonies, etc. Changing consumption habits and rising incomes enhance the demand for processed products and increase the potential for credit expansion for agro-processing. The crop diversification efforts will also require a substantial allocation of institutional agricultural credit. Skill development, agri start-ups, FPOs, agro-machinery service centers, etc., are other important sources for expanding institutional agricultural credit in Punjab.