Institutional sources of credit:

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These are the funds made available by co-operative societies, commercial banks, & regional rural banks & state governments also.  The need for institutional credit arises because of the weakness or inadequacy of  private agencies to supply credit to farmers. Private credit is defective because:-

I.      It is based on profit motive &, therefore, it is always exploitative.
II.      It is very expensive and is not related to the productivity of land.
III.      It does not flow into most desirable channels and to most needy persons.
IV.      It is not available for making agricultural improvements—and much of the necessary improvements are not undertaken as funds are not available for long periods at low rates of interest
V.      It is not properly integrated with the agriculturists other needs.

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