Credit Rationing in Rural Credit Markets of India

Kausik Chaudhuri and Mary Cherical ()
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Mary Cherical: IGIDR - IGIDR

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Abstract: This paper analyses the prevalent situation of the formal financial institutions in rural India using data from National Sample Survey 54th Round (January-June, 1998). We use sample selectivity model to examine the sanction of the loan by the financial institutions as a two-stage process. We model the choice of the household's credit requirement using an unordered choice model, namely, a multinomial logit model. Our results reveal that the rural households are considerably credit constrained. The households who do not have an account in a financial institution have a lower chance of obtaining the loan and households who are credit constrained have relatively lower land holding and they do not possess livestock. Households who borrow for non-farm purpose exhibit a lower chance of obtaining credit compared to those households who borrow for farm business. Village level infrastructure plays an important role in determining the credit rationing behaviour in rural-India.

Keywords: Social; Sciences; &; Humanities (search for similar items in EconPapers)
Date: 2011-03-01
Note: View the original document on HAL open archive server: https://hal.science/hal-00675394
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Citations: View citations in EconPapers (4)

Published in Applied Economics, 2011, pp.1. ⟨10.1080/00036846.2010.524627⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00675394

DOI: 10.1080/00036846.2010.524627

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