Rural Credit Markets

This book is an in-depth study of informal rural credit markets. The study traces the reasons behind the pervasiveness of informal credit markets to interlinkages between credit market and other agrarian markets. The study has been carried out in Punjab, which is agriculturally the most advanced state of India. The presence of commission agents, or ‘arhtiyas’, as the dominant form of informal lenders here, carrying out credit deals interlinked with sale of output, has shattered the long held belief that interlinkage is a feudal relic. At the same time, the study points out the weaknesses of policy intervention in credit markets. The financial sector reforms, carried out since 1990s based on Narasimham Committee Report, lay much stress on priority sector allocations and rate of interest, but completely by-pass the core issue of collateral security and timely access to credit. This study systematically examines the importance of these issues from policy point of view. This book will provide a rich research agenda to evaluate the consequences of a variety of government interventions in the credit market, and suggestions for further reforms in credit policy.