Answer:

Reorganizing agrarian relations was the main aim of land reforms in India. The hold of moneylenders over the peasantry was to be weakened by providing credit through institutional sources initially by credit societies and later by nationalized commercial banks.

With the imposition of social control and later their nationalization, commercial banks were asked to lend to the agricultural sector on priority basis. Over the years the dependence of rural households on informal sources has come down significantly. While empowering the vulnerable marginal land holder, institutional lending has also empowered women.

However, institutional farm credit mechanisms had limited impact on overall agrarian relations. The low level of education and awareness among the rural populace keeps them from utilizing credit facilities to their potential. Also, informal tenants cannot gain access to capital from banks and financial institutions. A recent study of a spate of farmers' suicides in Karnataka found that many of them were informal tenants who borrowed from moneylenders and could not pay back because of high interest rates.

Yet institutional credit has played an important role in making the green revolution a success and uplifting of millions out of poverty.

Also, cooperatives working in rural areas are playing noteworthy role in rural lending. Initially cooperatives were just to provide credits to the farmers through resource pooling. Gradually the role of cooperative societies grew to encompass socio-economic development and eradication of poverty in rural India. It also became an integral part of five year plan, and thereby, a fundamental part of our economy.

However, assessment studies have showed that much of their credit went to relatively better of sections and the poor continued to depend on more expensive informal sources. This was explained as a consequence of the prevailing structure of land tenures. The state response was to bureaucratize the cooperative societies, though in some regions this helped in releasing credit societies from the hold of big landowners.

Overall the contribution of cooperatives has been positive, but there is scope for improvement by improving women participation. Legalizing tenancy will also help to bring the small and marginal tenants within the ambit of institutional credit. Recent amendment of Constitution making provisions for autonomous and democratic functioning of cooperatives will go a long way in this regard.