Answer:

The ratio of agricultural credit to agricultural GDP has increased from 10 per cent in 1999-2000 to around 38 per cent by 2012-13. However, the share of long-term credit in agriculture or investment credit has declined (55 % in 2006-07 to 39% in 2011-12). Moreover the following trends depict the issues with formal credit in rural sector:

♤ Inequity in credit disbursed—the share of loans above Rs.10 lakh is going up and over a quarter of the credit is advanced from urban and metropolitan branches of banks. These loans mostly cater to input dealers, agri-businesses such as food and agro-processing industries and warehousing companies.

♤ Steady share of informal sector in loans to agricultural households (around 40% between 2003 and 2013).

♤ The declining share of small loans (less than 2 lakh).

♤ March Phenomenon-banks lent over 46% of agricultural credit between January and March— perhaps to meet year-end targets —although farm loans are most likely required before the crop season begins, around June and November.