It has been considered necessary to replace the private moneylender by institutional sources of credit because
(i) The supply of credit was irregular and depended largely on personal relations between the borrower and the lender.
(ii) The moneylenders often took advantage of the ignorance and helplessness of the cultivator to
(iii) Since, the borrower was generally illiterate, the moneylender often resorted to downright cheating such as failure to record die repayments in full.
(iv) The landless tenants and farm workers, who had no land to offer as security, found it difficult to borrow. The loans were available, on very onerous terms and the borrowers were often saddled with permanent debt.