Vol. 12, Issue 5 (2023)

Author(s):
Murali N and Anjan Kumar MJ

Abstract:
Institutional credit flow has greatly helped the agricultural sector in India, with a significant increase in credit flow from 2005-2020. The government has been providing interest subvention to those farmers who repay their short-term crop loans on time, thus bringing down the effective rate of interest to 4 percent per annum. The contribution of commercial banks to the agricultural credit is highest with 70 percent followed by Co-operative banks and RRB. The ratio of credit to Agricultural GDP and Credit to total GDP were higher during the period of 2017-18, indicating the efficacy of the credit. The factors influencing the total agricultural output growth have been analysed through linear regression, and it has been observed that credit has a significant relationship with agricultural output at a 10 percent level of probability. The determinants of the supply of institutional credit have also been analysed, and it has been observed that all the variables except pesticide consumption have an influence on agriculture credit. Gross cropped area has the most significant impact on credit flow, followed by gross irrigated area and GDP. Overall, the flow of institutional credit to the agricultural sector is crucial for its growth and development.