The present study attempts to analyze the extent of repayment and overdues and also the causes for overdues at the farm-household level, identify the factors which discriminated the borrowers into non-defaulters and defaulters, and assess the probability of willful and non-willful defaulting. One hundred sample borrowers of commercial and cooperative banks were selected for the present study. To identify the factors which discriminated the borrowers into non-defaulters and defaulters, discriminant analysis was carried out. Logistic regression analysis was applied to find out the probability of the farmers becoming willful and non-willful defaulters. Utilization of credit and non-farm income were the dominant factors in classifying the borrowers into defaulters and non-defaulters. Farm income and consumption expenditure were the significant factors to determine willful defaulting. One unit of increase in the factors such as farm income and consumption expenditure would lead to one unit increase in willful defaulting. The sources of credit availed and interest rate were the significant factors to determine the amount of non-willful defaulting.

Agriculture credit is one of the prerequisites for farmers to increase the agricultural output in the process of agricultural development of a country. The Green Revolution has paved the way for the birth of new strategy and modernization in agriculture (Kumar et al., 1987), which requires two types of finance. One to meet the fixed capital requirements for creating adequate infrastructure to adopt a new strategy of production; the other is required to meet the variable expenses (Modi and Raj, 1993) and thus, the increasing demand for agricultural credit. The increased demand for agricultural credit can be met by a systematic expansion of rural credit system (Kumar et al., 1987).

The institutional characteristic of the Indian rural credit system is dualism where both formal (institutional) and informal (noninstitutional) sectors coexist (Umesh, 2000). The formal sector consists of commercial, cooperative and regional rural banks. The informal sector consists of traders, merchants, contractors, commission agents and local moneylenders (Nair, 2000).

The Reserve Bank of India (RBI) stipulated subsequent to nationalization, that commercial banks should earmark at least 40% of their advances for the priority sectors, of which 18% should be for agriculture and 10% for weaker sections (Nair, 2000).

To achieve this objective, various organizational and policy frameworks such as, Lead Bank Scheme (1969), Service Area Approach (1989), Micro Finance Scheme (1992), Kisan Credit Card System (1998), etc., were initiated. Due to these policy measures, the institutional credit comprising commercial bank credit and cooperative credit had increased from Rs. 885 cr in 1970-1971 to Rs. 125,309 cr in 2004-2005 (Economic Survey, 1971-2005).

Bank Management Journal, Cooperative Banks, Agriculture Credit, Commercial Banks, Logistic Regression Analysis, Indian Rural Credit System, Informal Sectors, Micro Finance Scheme, National Bank for Agriculture and Rural Development, NABARD, State Government Agencies, Multiple Regression Analysis, Land Development Banks.