Factors affecting diversion of institutional credit in border and non-border areas of rural Punjab

The present study was undertaken to examine the credit utilization and diversion of agricultural credit availed for investment purposes by the different categories of farmers in border and non-border areas of rural Punjab. The data were collected from farm households of areas adjoining Indo-Pak border in Punjab. In border areas, expenditure on marriage ceremonies, medical treatment and general purposes was higher. While in non border areas expenditure on construction of dwelling houses was more. The analysis showed that non-institutional loan was the main factor affecting positively on diversion of credit where as non-farm income, literacy and farm size affect negatively on diversion in border area of rural Punjab. In non-border areas per capita household expenditure and non-institutional loan were found to be affecting positively on diversion of credit while non-farm income and literacy were affecting negatively on diversion. So, there is need to properly supervise these farm loans.