Institutional Agricultural Credit and Utilisation Behaviour: Evidence from Farm Households in Karnataka
Abstract
Institutional agricultural credit enhances farm productivity; however, its impact depends on how effectively borrowed funds are utilised. The study examined the sources, extent, utilisation behaviour, and determinants of credit use among 120 farmers (254 loan accounts) selected through multistage random sampling in Bagalkot district, Karnataka, during 2024–25, using descriptive statistics, the Gini coefficient, one-way ANOVA, Garrett ranking, and a binary logit model. Commercial banks dominated credit supply (60.86 per cent), followed by PACS (33.97 per cent), with large farmers receiving 42.52 per cent. Although 78.85 per cent of the credit was used productively, only 25 per cent of farmers utilised it as intended, with significant variation by farm size. Non-farm income and credit amount significantly improved the proper utilisation. Promoting non-farm incomes, strengthening guidance on extension-linked credit, and aligning loan sizes with genuine credit requirements would improve utilisation. Keywords Agricultural finance, farm investment, income diversification, rural households. JEL Codes G21, Q12, Q14.