Farm Lending by Public and Private Sector Banks in India:Risk Factor Analysis

Liberalization of the financial market and financial reforms should be applauded for a gradual increase in financial intermediation, this doesn't seem to have had significant impact to famers as seen from the agricultural sector's performance in terms of farm yields over the years; a situation which has seriously constrained the agricultural sectors' development and to a large extent floundered attempts to alleviate poverty in the country.

The attitudes that characterize bank lending to farmers and the information gap between banks and farmers complicates credit accessibility by farmers thereby curtailing their productivity and profitability. Theoretical approaches given by previous studies don't seem to agree on what issues determine commercial bank lending in general, let alone lending to the farmers. Andhra Pradesh (AP), India studies risk factors determining profitability in the formal banking sector which does not effectively lend to farmers.

Other studies on micro finance institutions focused on credit rationing and its influence on the operations of small and micro enterprises. This study will help to address the factors that contribute to lending to farmers by commercial banks in the state of Andhra Pradesh.