Classify rural credit in different categories on the basis of time period.

Question

Accepted Answer

Rural credit may be classified on the basis of time period as follows:

1. **Short-term credit:** Taken for a period of less than 15 months to meet short-term needs such as the purchase of seeds and fertilisers and the payment of wages to hired workers. Such loans can be repaid out of the current income of farmers.

2. **Medium-term credit:** Taken for a period ranging from 15 months to 5 years. It is needed for productive activities like purchasing cattle and agricultural implements, and for unproductive activities like expenditure on marriage and social or religious functions. It also covers loans for constructing fences and digging wells.

3. **Long-term credit:** Taken for a period of more than 5 years, which may extend to 15 to 20 years. It is needed for making permanent improvements on land, digging tubewells, purchasing larger agricultural implements and machinery like tractors and harvesters, and for the repayment of old debts.