While significant progress has been made in formalizing rural credit, major challenges remain. Although about 70 percent of rural credit came from institutional sources by the early 2020s, a sizable chunk of the rural population borrows from informal sources. Only about one-third of farmers have access to credit facilities, and poorer farmers with fewer assets or collateral find it harder to get loans. Broadly, growth in rural credit from scheduled commercial banks has lagged overall credit growth since 2000. Agriculture’s relative share in non-performing assets (NPAs) has been on a steady incline for at least a decade—often exacerbated when poor monsoons affect crop yields. The lack of access to institutional credit and chronic indebtedness is also seen by some researchers as a contributing factor to the phenomenon of farmer suicides in rural India. At the same time, sweeping farm loan waivers have been criticized for impairing credit discipline, draining the public exchequer, and discouraging lending. Critics advocate instead for improving and supplementing farmer incomes.
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