Q. In India, which of the following have the highest share in the disbursement of credit to agriculture and allied activities? (UPSC Prelims 2011)
Answer: Commercial Banks
Notes: The correct answer is Commercial Banks. In the Indian agricultural credit system, a "multi-agency approach" is followed, involving Scheduled Commercial Banks, Regional Rural Banks (RRBs), and Cooperative Banks. However, the volume of credit disbursed is not equal across these institutions.

• Commercial Banks (Highest Share): Scheduled Commercial Banks (both public and private sector) provide the largest portion of agricultural loans, typically accounting for 75% to 80% of the total institutional credit. Their vast network and larger capital base allow them to dominate the lending landscape.
• Cooperative Banks: These were historically the primary source of rural credit but their share has declined over the decades. They currently account for approximately 10% to 12% of the credit flow, focusing largely on short-term seasonal crop loans.
• Regional Rural Banks (RRBs): Created specifically to bridge the gap in rural credit, RRBs contribute roughly 10% to 12% of the total disbursement, similar to cooperative banks.
• Microfinance Institutions (MFIs): While they play a crucial role in financial inclusion and small-scale lending to Self-Help Groups (SHGs), their overall share in the total volume of agricultural credit is significantly smaller than that of the formal banking sectors.