In India, about 80% of farmers are small fanners

In India, about 80% of farmers are small fanners, who need credit for cultivation.
(a) Why might banks be unwilling to lend to small farmers?
(b) What are the other sources from which the small farmers can borrow?
© Explain with an example how the terms of credit can be unfavourable for the small farmer.
(d) Suggest some ways by which small farmers can get cheap credit.

(a) Normally, small formers have no collateral to pledge against loans. Since forming is a high risk activity, banks are unwilling to lend to small burners.
(b) Small farmers can take loans from cooperatives, SHGs (if they are members) or informal sector credit sources like moneylenders, traders, relatives, friends, etc.
© An example of unfavourable terms ofcredit is given below
Shiva is a small former who borrows money at the rate of 4% per month (i.e. 48% per annum) from a local moneylender to grow his crop.
The crop foils due to a severe drought. As a result, Shiva has to sell part of his land to repay the loan. Thus, his condition becomes worse than before.
(d) Small formers can get cheap credit from sources like regional rural banks, agricultural cooperatives, SHGs, etc.