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Abstract
In spite of various measures to rejuvenate farm credit, the flow of credit to agriculture sector remained
inadequate quantitatively and qualitatively. The study is based on a random sample of 600 farm households
covering 11 districts in Punjab, comprising 107 marginal, 150 small, 53 semi-mediums, 87 medium and
103 large farmers and pertains to the year 2005-06. The total debt per sample farm household from both
institutional and non-institutional sources has been found to be Rs 178934 in the year 2005-06. The
institutional sources have contributed about 62 per cent to the total debt and non-institutional 38 per cent.
Although the institutional credit has increased rapidly in recent years in Punjab, it still lacks behind the
productive needs of the farmers in Punjab. A farmer on an average has to incur Rs 4016 for obtaining a
loan from commercial banks, which amounts to 5 per cent of the total loan obtained by him. In the case of
cooperatives, the transaction cost has been worked out to be 1.2 per cent of the loan and the cooperatives
are located right in the villages. About 59 per cent farmers have reported the procedure to get loans from
the institutional agencies to be complicated and time-consuming. On the contrary, availing non-institutional
loan has been found easy and is the reason of preference given by 51 per cent farmers to it. Policy
implications include issuing of a simple but comprehensive record book to farmers containing information
relating to his land record and institutional transactions; computerization of land records by the state
government; simplification of loan application form; and maintenance of proper records of loan applications
and making disbursement of loan mandatory.