A study on agriculture credit: Utilization pattern and diversion in drought prone areas of Hyderabad-Karnataka region

The results indicates that the percentage change of drought over normal situation for quantum of loans was negative for institutional agencies while for non institutional agencies it was positive (Rs. 217.36 Lakhs) and increasing. Further, the Non-repayment of loan in case of institutional agencies was about 65.55 per cent for drought situation where as only 32.22 per cent of was for normal situation. During drought period small and marginal farmers were using higher credit on non agriculture purpose (68.24 per cent) when compared to normal situation (50.94 per cent). Hence the study reveals that disbursement of agriculture credit was high in non institutional agencies like money lenders, chit funds etc, who charge higher interest rates finally leads to the vicious cycle of never ending debt which may result in land to landless owners. It also points that non-institutional agencies should use incentives to ensure financial regulation and to construct a positive relationship among the borrowers and money lender.