A Study Relating to Diversion of Agricultrual Credit

Agricultural development is an integral part of overall economic development of country like India. Though, the share of agricultural sector in gross domestic product (GDP) of India, has reduced from 58 percent (1951-52) to about 17.3 percent (2016-17), still it is considered a decisive driver, in order to achieve 8 to 9 percent growth in GDP. For agricultural development, adequate and timely availability of credit to the farmers is vital and indispensable, as it acts as a catalyst, to move the farmers from traditional to modern agriculture. Agricultural institutional credit has been growing continuously, after the nationalization and other banking sector reforms. But, past experience shows declining trend, in recovery performance of the banks and rural indebtedness, which is affecting adversely the disbursement of agricultural credit. The main reason behind the problem of low recovery is, misutilization of agricultural loan amount, as farmers do not utilize the loan amount, for the purpose for which it is taken. It becomes more dangerous, when agricultural credit amount is utilized for unproductive purposes, which do not generate any income. In light of the above, an attempt has been made in this paper, to analyze the different aspects relating to diversion of loans. The results indicate that, among purposes, 'Buying other inputs' and 'Consumption' are the main purposes, for the diversion of loan followed by 'Meeting social expenses'.