The importance of credit in rural development are as follows :
(i) Credit for production : In this, all type of credits are included which are used for various farm activities such as credit for seeds, fertilizers, irrigation and fodder. The farmers have credit to borrow to pay the rent on land, wages of the labourers, government tax etc.
All these activities are related to production,
Therefore, the credit received to meet their
needs is called productive credit,
(ii) Credit for consumption : Indian farmers borrow not only for productive works but for
consumption also. In this the credit is received
for the following objectives :
(A) For marriage and death.
(B) To repay the old debts.
(C) For the repair, construction and purchase
(D) For irrigation