ques. discuss the classification of rural credit in india

On the Basis of Purpose and Use

 Rural credit can be classified on the following basis.

  • On the basis of purpose and use of the credit 
  • On the basis of duration of credit

On the basis of purpose and use, the rural credit can be further bifurcated into two sub-categories. 

1. Productive Credit- Required for purchasing farm inputs, raw materials (such as seeds, fertilisers, etc.) and machinery (such as tractor, threshers, etc.)

2. Unproductive Credit- Required to fulfill the personal expenses of the farmers and also to meet social obligations such as daughter’s marriage, medical expenses, etc. 

On the basis of duration of Credit, the rural credit is classified as:

1. Short term credit- Granted to the farmers for a short period of time ranging from 6 to 15 months. This type of credit is basically granted to meet the immediate farm needs such as seeds, fertilisers, and other vital farm inputs. 

2. Medium term credit: Granted for a time period between 15 months to 5 years. The rationale to take such credit is to purchase productive capital goods such as farm machinery and livestock, undertake land improvements, etc. Such credits are also taken to meet the social obligations such as daughter's marriage, medical expenses, etc. 

3. Long term credit: Granted for a period of 5years to 20 years. Usually required for purchase of land-farms, undertake modernisation and mechanisation by purchasing sophisticated and modern machinery.

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