UPSC Prelims 2011 Q83: Indian Economy – Agriculture & Rural Development
In India,
which of the following have the highest share in the disbursement of credit to agriculture and
allied activities?
- (a) Commercial Banks
- (b) Cooperative Banks
- (c) Regional Rural Banks
- (d) Microfinance Institutions
Answer: (a) Commercial Banks
Explanation
Who leads agricultural credit disbursement in India
Several institutions lend to agriculture, but one dominates by volume.
| Option | Verdict | Reason |
|---|---|---|
| (a) Commercial Banks | Correct | Commercial banks (public and private sector) disburse the largest share of agricultural and allied-sector credit in India |
| (b) Cooperative Banks | Incorrect | Cooperative banks lend significantly to agriculture, but their share is smaller than commercial banks' |
| (c) Regional Rural Banks | Incorrect | RRBs serve rural credit needs but contribute a smaller share overall compared to commercial banks |
| (d) Microfinance Institutions | Incorrect | MFIs serve a niche, smaller-scale segment, far below commercial banks' overall agricultural credit share |
Agricultural credit institutions in India:
| Point | Detail |
|---|---|
| Largest share | Commercial Banks |
| Other lenders | Cooperative Banks, RRBs, MFIs — smaller shares |
| Policy context | Priority-sector lending norms push banks toward agricultural credit targets |
Answer: (a) Commercial Banks.
Why each option is right or wrong
- (a) CORRECT. Commercial banks disburse the largest share of credit to agriculture and allied activities in India.
- (b) Incorrect. Cooperative banks play an important but smaller role compared to commercial banks.
- (c) Incorrect. Regional Rural Banks contribute a smaller share than commercial banks overall.
- (d) Incorrect. Microfinance Institutions serve a niche segment with a much smaller overall share.
Key point
Commercial Banks hold the largest share of agricultural credit disbursement in India, ahead of Cooperative Banks, Regional Rural Banks, and Microfinance Institutions.
Remember
Commercial Banks have the highest share of agricultural/allied-sector credit disbursement in India.
Common mistakes
- Assuming Cooperative Banks, due to their historical rural focus, lead in agricultural credit volume.
- Overestimating the overall share of RRBs or MFIs relative to mainstream commercial banks.
- Not connecting priority-sector lending norms to why commercial banks dominate agricultural credit.
Exam tip
Commercial Banks = largest agricultural credit disburser in India, due to priority-sector lending requirements and scale.
Sources
- Reserve Bank of India — Report on Trend and Progress of Banking in India 2009–10 (agricultural credit)
- National Bank for Agriculture and Rural Development — Annual Report 2010–11