The All-India Debt and Investment Survey (AIDIS) carried out by National Statistical Office gives an account on the rural credit market in India.
What does the report say?
Rural debt - The average debt per household in rural India is Rs 59,748, nearly half the average debt per household in urban India.
Incidence of indebtedness (IOI) - The IOI is 35 % in rural India — 17.8 % of rural households are indebted to institutional credit agencies, 10.2 % to non-institutional agencies and 7 % to both.
Rate of interest - The rate of interest charged on 45 % of institutional debt is between 10-15 % whereas on 44 % of non-institutional debt falls between 20- 25 %.
Debt-Asset Ratio (DAR) - DAR of the bottom 10% asset-owning households in rural India is 39, much higher than the DAR of 2.6 for the top 10 % households.
Expenditure - The top 10 per cent rural households in terms of asset ownership spend most of the debt on farm/non-farm business, whereas the bottom 10 per cent it on household expenditure.
What can be inferred from the report?
Easy and timely access to formal-sector credit enables households to invest in income-generating activities while non-institutional sources help to meet short-term consumption needs.
Dependence on institutional sources signifies broadening financial inclusion while reliance on non-institutional sources denotes vulnerability and backwardness.
In non-institutionalised debt, professional and agricultural moneylenders remain the primary sources of credit.
Access to institutional credit is largely determined by the ability of households to furnish assets as collateral.
Access to credit is complicated by the interplay of social identities as marginalised social groups have low asset ownership.
Non-institutional sources have a strong presence in the rural credit market, notwithstanding the high costs involved in borrowing.
Inadequate access to affordable credit lies at the heart of the rural distress.
The credit policy needs to be revamped to accommodate the consumption needs of the rural poor and to find alternatives for collateral for rural financial inclusion.
