Assessing the Use of Land as Collateral for Accessing Credit from Institutional Sources in Rural India

Data on access to credit in rural India is mostly available from periodic large-scale surveys and some primary research in different parts of India. The growth of institutional sources of credit was quite dramatic during the first four decades after Independence. There appears to have been a regression since then. There is some evidence to show that land as collateral is a frequent requirement for institutional lenders. There is also some scattered evidence that land is more likely to be used as collateral by larger landholders and a clear title favours extension of loans. However, there is very little data on the extent to which these hypotheses hold well across States. Textual records [copies of Record of Rights (RoRs)] gathered for the construction of the NCAER Land Records and Services Index (N-LRSI) 2020 offered an opportunity to understand the situation in different States with respect to the issues mentioned above. This paper assesses the data gathered for six Indian States/Union Territories (UTs): Chhattisgarh, Gujarat, Himachal Pradesh, Madhya Pradesh, Uttar Pradesh, and Uttarakhand. The paper highlights the extent to which various hypotheses prevalent in the literature are borne out by the evidence obtained through the sample data gathered for the States/UTs that are the subject of this paper. While adding to the knowledge on the subject, it will help enhance an understanding of both the subject and policy making in the area of rural credit.