3. Dynamics of Access to Rural Credit in India: Patterns, Determinants and Implications

The study has analysed the changes in the structure of rural credit delivery and inclusiveness of rural credit flow across states and social groups, along with identification of factors that influence the choice of credit source. Also, the impact of access to institutional credit was examined on farmers’ welfare. The study is based on the unit-level data of Debt and Investment Survey carried out by NSSO during 1992 (48th round), 2003 (59th round), 2013 (70th round) and Situation Assessment Survey of Agricultural Households (70th round). The study has found that the structure of credit market has changed overtime and the share of institutional credit has increased. The initiatives taken by the government have paid off, and the flow of institutional credit to rural areas has increased significantly even in real terms. The indicators of financial inclusion have shown a sign of improvement. However, regional disparity and presence of informal agencies in the disbursement of rural credit are still persistent. Rural households’ access to institutional credit is influenced by a number of socio-economic, institutional and policy factors. In our analysis, the education, caste affiliation, gender and assets ownership have been found to influence the rural households’ access to institutional credit significantly. The access to institutional credit has been found to increase the agricultural household’s income substantially. A concerted effort and appropriate policy reform are required to make rural households’ access to institutional credit neutral to caste, class and regions.