After independence the Government adopted the institutional credit approach through various agencies like co-operatives, commercial banks, regional rural banks etc.
From the very beginning the prime source of agricultural credit in India was moneylenders.
Nowadays, the long term and short term credit needs of these institutions are also being met by National Bank for Agricultural and Rural Development (NABARD).
Sources of agricultural credit can be broadly classified into institutional and non-institutional sources.
Thus, the non-institutional sources of farm credit have been facing serious loopholes like exorbitant rate of interest, loan for unproductive purposes, non-repayment of loan etc.
The main motive of institutional credit is to assist the farmers in raising their agricultural productivity and maximising their income.Out of these institutional sources, co-operatives contributed 40 per cent and commercial banks contributed 30.0 per cent of the total farm credit in 1996.(i) Moneylenders: From the very beginning moneylenders have been advancing a major share of farm credit. Moreover, with growing modernisation of agriculture during post-green revolution period the requirement of agricultural credit has increased further in recent years. This type of credit includes credit requirement of farmers for medium period ranging between 15 months and 5 years and it is required for purchasing cattle, pumping sets, other agricultural implements etc. to provide adequate credit to farmers, at a cheaper rate of interest.(iv) Landlords: In India, small as well as marginal farmers and tenants are also taking loan from the landlords for meeting their financial requirements.This source has been following all the ill-practices followed by money-lenders, traders etc.Thus its importance has been declining in recent years.(iii) Relatives: Cultivators are also normally borrowing fund from their own relatives in times of their crisis both in terms of cash or kind.Moneylenders are of two different types: (a) Professional moneylenders (b) Agriculturist moneylenders.These moneylenders were supplying a major portion of agricultural credit (69.7 per cent in 1951-52) and indulged into malpractice like manipulation of accounts and charged exorbitant rate of interest on their loan- often 24 per cent and over.