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Rural Credit – Meaning, Sources, Types and FAQ

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India is an agricultural country. The primary income of most people living in the rural areas of India depends on agriculture. Every year, farmers need a huge amount of money to grow crops in their fields. Therefore, farmers always take loans from moneylenders and financial institutions for their good crops even before the crop season arrives. When he sells his crops, he pays off his debt. To increase crop production, the farmer uses many types of fertilizers and modern seeds, which are very expensive. For this expenditure, he borrows money in various ways.

Credit in Rural India

Credit in Rural India

The government has created various institutions to protect the farmers from this type of loan with high-interest rates. Some of them are as follows –Establishment of Social Banks established in the year 1969 and National Bank for Agriculture and Rural Development (NABARD) established in the year 1982 which proved to be an example for Indian farmers.

Types of Credit in Rural India

  1. Short-term credit: In this type of credit, the time limit to repay the money is for a limited time. This is a short-term credit. In this, the farmer has to repay the loan in less than a year.
  2. Half-yearly credit: In such credit, money is borrowed for a very short time, which runs only on faith. Most of the farmers in India take this type of credit.
  3. Medium-term loan: In this type of loan, all those loans come whose time period is from 2 years to 10 years. This type of loan is called a medium-term loan. The amount of this type of loan is also higher than normal. A loan on a credit card is always given by looking at the credit score.
  4. Long-term loan: In this type of loan, the amount of money is much more, which the farmer can repay in 20 years than in 5 years. This credit is very useful for the development of agriculture. For example, a farmer can build a big farmhouse with this kind of credit and can do many other big things. That’s why this credit is considered the best.

Sources of Rural Credit

Land Development Banks

This type of bank keeps the registry of the farmers’ land and necessary documents with them and gives loans to the farmers in exchange for them. In this type of loan, the amount of money is dependent on the cost of your land. It is also given as interest on the gift. It takes 15-20 years to make a lot of money. This type of loan is availed by a few people in rural areas.

Co-operative banks

This government committee is the most suitable medium for farmers to take loans. It is given to save the farmers. This loan is easily available to the farmers, it does not require many documents.

Grameen Bank Established by the Government

This Gramin bank gives loans to marginal farmers, landless farmers, and laborers. So that he can live his daily life. These banks pass loans for small amounts and short term.

Commercial Banks

These banks were reluctant to give loans to the farmers, although now these banks provide financial assistance to the farmers directly and indirectly. A direct loan provides an ease to farmers in farming and an indirect loan is given by some other institutions which takes some time to pass.

FAQs on Credit in Rural India

Question 1: Why do farmers need loans?


To buy fertilizers and modern seeds, Long gestation period, To buy inputs, Personal expenses, etc.

Question 2: What is a Kisan credit card?


A Kisan credit card is a credit card designed for farmers that provides them with access to credit to finance agricultural activities.

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Last Updated : 10 Mar, 2023
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