Institutional Credit Delivery to Agriculture in Andhra Pradesh: An Empirical Analysis of Regional Rural Banks

Abstract

The Regional Rural Banks (RRBs) are in an ideal strategic location in the institutional credit structure of Indian agriculture, as it is required to mediate between the formal banking infrastructure and the rural farming population. One of the agriculturally important states of India, Andhra Pradesh is a fascinating case study owing to its various agro-climatic regions, diversified patterns of cropping, as well as the fairly developed RRBs penetration post the state bifurcation of 2014. The paper identifies the empirical investigation and study of the agricultural credit disbursement by RRBs in Andhra Pradesh during the period 2013-14 to 2022-23. The paper analyses the trends of credit flow, percentage ratio between crop loans and term loans, district level imbalances in the ratio of credit and deposits and the correlation between RRB credit and agricultural output using secondary data collected by NABARD, RBI, and state level banking statistics. The determination of the important determinants of agricultural credit disbursement is done with the help of econometric analysis through Ordinary Least Squares (OLS) regression. Findings indicate that there is a strong upward trend in RRB agricultural credit, growth in compound annual 14.3 and statistically significant positive association between credit disbursement and agricultural GDP. Nevertheless, inter-district inequalities, structural preeminence of short-term crop lending, and endemic inequalities in access to credit facilities by marginal farmers and tenant cultivators are matters of concern. The policy recommendations on how the role of RRBs can be strengthened in inclusive agricultural finance are the last points of the paper.